Milk Quota for Dairy Farmers

Dairy farmers have been feeling the pinch recently but they should still ensure they are keeping up to date with all the latest professional advice because failure to do so could be costly. In this context Milk Quota springs to mind.
  
Milk Quota is an invention of the European Union (EU) which was introduced in 1984 in order to limit production and nearly 30 years quotas are still with us but how the farming landscape has changed in the intervening years. Back then farmers were subsidised to produce food and the markets were underpinned by intervention support which meant the EU (or EEC as it was then) used to purchase produce when the price fell below a certain level thereby underpinning the market.

This not unsurprisingly led to massive over production as supply was not linked to “demand” and as a result huge stocks of milk and milk products were stockpiled in intervention stores across the EU giving rise to the so called “milk lakes” and “butter mountains”. As a consequence the EU introduced Milk Quotas on 2nd April 1984 which prevented farmers producing more than their allocated quota by imposing penal fines for overproduction.

In the early years following their introduction, the volume of Milk Quota held by a farmer was the most significant limiting factor on production because almost overnight the amount of milk UK farmers could produce had been cut by approaching 20%. This was a hard time for dairy farmers and if they wanted to sustain their level of production they needed to acquire Milk Quota.

Thus a market to buy and sell Milk Quota soon developed and by the mid 1990s when milk prices were high in the immediate aftermath of the de-regulation of the milk industry in 1994, the price of Milk Quota rocketed. Farmers facing fines for overproduction were forced to buy Milk Quota at prices as high as 80p per litre.

However, since then the EU has decoupled subsidies from production and farmers are now exposed to world markets and as a consequence the rules of supply and demand are the primary drivers influencing production and therefore the EU intends scrapping Milk Quota in 2015. But herein lies a potential opportunity for dairy farmers because as production has fallen so too has the demand for Milk Quota which is now only worth in the order on 0.2 p per litre – less than a quarter of one percent of its peak value.

This may not seem like an opportunity but it is in that if a farmer can crystallise this capital loss by selling his Milk Quota and then purchase it back, this capital loss can be “banked” now and can be offset against any capital gains in the future. So, dairy farmers who have not already taken advantage of this opportunity should do so without delay although tenants should be aware that consent of their Landlord may well be required to sell Milk Quota.


James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

Let’s go fly a kite…

08 October 2012, With apologies to Mary Poppins, Will Mooney, Carter Jonas partner and joint head of its commercial agency and professional services in the eastern region, is not in the party mood this conference season.

The mainstream political parties are in conference mode but these events are not, in modern times, the kind of seaside shindigs of old. Metropolitan locations of Birmingham and Manchester are preferred to Blackpool these days with just the Liberal Democrats sticking to the seaside tradition in Brighton this year.

But that’s not to say there isn’t breeze enough in these cities to encourage as much kite-flying on the policy front in the coming month as in the past one.

There’s been the great hope that the country’s fortunes can be revived by up to 8 metres worth of building extensions. Capitalising on the fervour of our victorious summer of Jub-Olympics, you’d be forgiven for thinking that it’s the patriotic duty of every householder and landlord of a small business unit to build on this success.

This is an offer for a limited period only and to no more than 25 ft or so, and as long as the property’s not in a conservation area or the owner of a listed property and other caveats which include not annoying neighbours.

Unfortunately, this kite is now being firmly tethered by local authorities who, although of the same political hue as central government, just don’t want to play that particular game.
You have to wonder whether this policy won’t go the same way as that plan to sell off the country’s publicly owned woodlands. If you remember that from last year. I had to be prompted myself.

Then we had another dusting down of the proposal for a British Business Bank (BBB). Vince Cable, as Business Secretary, advised that it would be a bank for ‘gazelles’ – those young, agile companies who were fleet of foot (or hoof) and would be looking for ‘patient lending’ over a 20 year period.

News of the BBB was received quite coldly by hardnosed financial commentators, not least because it was announced on the very same day that the Public Accounts Committee aired the failure of the Regional Growth Fund.

Launched by the Deputy Prime Minister in September 2010, with a target of making 36,800 jobs through a fund of £1.4 billion to ‘real’ companies, two years on from its launch, just £60 million of the Fund had been taken up by companies with less than one in fifteen of the jobs target reached so far (2,400 jobs).

Aside from ‘events, dear boy’, it’s all about timing in politics.

For on the same day (11 September), I attended the official launch of the Cambridge & Counties Bank (CCBank) - which is owned by Trinity Hall, one of the oldest of the Cambridge colleges, and Cambridgeshire County Council’s pension fund -and on whose attributes I’ve commented on before.

At the risk of sounding like an A level question, BBB and CCBank: compare and contrast. There wasn’t a national politician in sight at the CCBank launch, thanks to the Cabinet re-shuffle the previous week which saw both the former and the new Financial Secretary to the Treasury unable to fulfil the gig commitment made previously.

What there was, encouragingly, was the reaffirmation by the CCBank that it recognised that business finance is a long game. As a start-up business itself, it’s geared-up to lending for up to that same patience period of 20 years that the BBB would do.

Mingling with the great and the good of Cambridge - and beyond - at the CCBank launch, I sensed that is the very model of a modern business bank and I couldn’t help but feel sorry for the Business Secretary who’d floated his BBB proposal that very morning.


Will Mooney MRICS
Partner
Commercial, Cambridge

Single Farm Payment rate change

Last Friday saw the rate at which farmers are paid the so called “Single Farm Payment” set and it will not make particularly happy reading. This is because the 2012 payment will be approximately 8% less than last year.

Single Payment, as it is more properly described, is the primary source of support farmers receive from the EU via the Common Agricultural Policy and is defined in Euros. The payments are then converted to pounds at the exchange rate prevailing at the end of September, which this year as was last Friday as 30th September was a Sunday.

The 2012 exchange rate was 79.805p per Euro which compared to 86.6665p per Euro last year, hence the unwelcome fall in income. This comes on top of a poor growing year and difficult harvest which has impacted on both arable and livestock farmers alike but it is probably the beef and sheep farmers who will feel the loss in EU support payments the most. This is because such payments still remain a vital source of income for livestock farmers, many of whom would lose money without them.

However, of perhaps more concern to most farmers is the ever increasing stringency of the Rural Payment Agency’s (RPA) farm inspections. The RPA is the body charged in England with running the Single Payment Scheme on behalf of the government and their inspectors seem to be becoming more and more exacting.

In particular their harsh interpretation of the Cross Compliance rules is becoming a matter of great concern. There are a vast number of such rules and ensuring compliance with every single one, however trivial they may seem, would be a challenging task even if one employed a full time member of staff dealing with this alone. However, the reality is that ensuring compliance with such rules is just one of the many tasks that farmers have to deal with on a day to day basis and I would suggest very few of them will ever be able to ensure 100% compliance 100% of the time.

Failures at inspections can lead to significant sums of money being withheld from and individual farmer’s Single Payment and there is little doubt in my mind that as time goes on these “fines” will become more and more significant. So farmers are advised to dust out the Cross Compliance guidance books and refresh themselves on what is required because failure to adhere to the rules may prove expensive.


James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

Game on for Cambridge makers

It’s back to school and back to work this coming month for many and while gearing up for a busy autumn, Will Mooney, Carter Jonas partner and joint head of its commercial agency and professional services in the eastern region, shows how there was no summer slouching in Cambridge.

With the nation still basking in a post-Olympics glow which looks set to be sustained by the achievements of our Paralympians, we’re told we’re returning to our desks in a new, positive frame of mind.

Positive in spirit and mindset at least, as we’re still faced with what’s become the certainty of economic uncertainty.

The regular round of statistics – inflation up, joblessness falling, employment rising yet GDP down in consecutive quarters – continues to baffle our brightest and best economists and policy makers.

Added to this, was a report by a core of MPs which has the British workforce down as ‘among the worst idlers in the world’ and bemoans our lack of productivity in comparison with our Brazilian and Chinese peers.

Taking a look around Cambridge, one could hardly accuse it of idling the summer away. Far from it. The summer months have seen commercial and business interests fired-up by various issues and announcements.

The beginning of August saw the new bank, Cambridge & Counties - which is owned by Trinity Hall, one of the oldest of the Cambridge colleges, and the county council’s pension fund - confirm that it had approved loans to the tune of over £2 million with an eye on a further £6 million commitment in the pipeline.

Fast and efficient work as it only opened officially for business in June which was also when the Government welcomed its establishment.

While, at first, our newest bank is focusing on lending to SMEs – with loans secured against commercial property - it does have retail bank ambitions too in the future.

What a banking contrast to our return from holiday in September 2007, when, like in many UK cities, we witnessed customers queuing in Cambridge to withdraw their deposit and close current accounts at the Northern Rock branch.

The queues were the harbinger of what was to transpire a year later when the term ‘credit crunch’ was coined and which been in use as common currency since then.

Interesting- and most encouraging for those of us in the property business - that the Cambridge & Counties Bank is securing loans against commercial property.

The enduring investment value of bricks and mortar for those in it for the long term received further fillips, locally, during the summer.

Last month saw councillors’ unanimous approval in a process which will bring forward the next stage of the substantial development of North West Cambridge. This is development on a scale which will see 2,000 student bedrooms and 1 million sq ft of academic, research and commercial space.

Also of commercial property note are the plans for a new, four-storey building at St John’s Innovation Park on which Savills is acting for St John’s College and on which public consultation was running over the summer.

In mid-August came the news that private healthcare provider, Nuffield Health is planning to replace its Trumpington Road hospital – built in the 1920s and for those of us who’ve been around almost as long, still known locally as ‘The Evelyn’ - with a brand new £25 million state-of-the-art facility.

So it’s been a busy time for Cambridge businessmakers but it’s also been a busy summer for the city’s policymakers as the City Council and South Cambridgeshire District Council both launched discussion about housing numbers and locations in July which will see pressure on the city’s green belt.

Far from being the silly season, this past summer has seen news of some august property projects taking great leaps forward either in rising apace from the ground – look at the rapid progress of both the Eastern Gateway entrance and cb1 – or in planning for the future.


Will Mooney MRICS
Partner
Commercial, Cambridge

A game of patience anyone?

With both the negotiating and conveyancing stages of residential transactions increasing exponentially, the tendency is for agents and their clients to become frustrated as a potential agreed sale, let alone exchange of contracts, appear to be well beyond the horizon.

With the right approach however, sales are being agreed, exchanging and completing but the entire process requires a greater degree of patience.

For the majority of properties, certainly in the Bath area, the days of quick-fire negotiating and rapid agreements on price are a thing of the past. This is currently due to both buyers and sellers rather than one party or the other.

The best opportunities for sellers to achieve the best price is within the first four weeks of marketing, but even if you inform your client of this from the outset they are usually opposed to agreeing a sale, taking the view that they may get a better offer if they are patient.

Buyers are taking a similar standpoint but naturally for opposing reasons. They are taking the view that there are fewer quality buyers in the market (and they are correct) and that they are more likely to get the property on their terms if they leave an offer on the table for the owners to consider over a longer period of time rather than hastily over-pay. 

In times gone by agents would be forgiven for thinking that a sale wouldn’t materialise out of these circumstances, usually because the buyer loses interest or finds something more suitable. That trend has changed though. Maintaining contact with your client, providing regular market feedback, as well as consistent and frequent updates to your buyer can be rewarding for all parties concerned. Over the course of the last six months properties from terraced town-houses to small country cottages and even larger country houses with land have benefited from this patient if somewhat protracted approach with negotiations ranging from one month to four months but significantly ending with happy sellers and purchasers alike. 

Unfortunately for everyone involved further reserves of patience are required to see us through the seemingly never ending conveyancing process. Between scrupulous solicitors, anxious surveyors and inefficient lenders, the timescale between exchange and completion is becoming cavernous, regardless of how often you are talking to all parties concerned.

Of the last eight properties to be sold by the Bath office this financial year only two have managed to exchange contracts within three months and nine of the properties under offer have already exceeded at least two months.

It is a trend that I believe will last as long as the market remains depressed. Buyers and their solicitors will remain nervous. Most surveys lead to a number of specialist reports with damp, timber, electrics and wiring being the most common. With lending criteria so stringent and the sheer amount of time that it is taking to process applications and book valuations those purchases requiring a loan will no doubt continue to take considerably longer than those that do not. 

It is imperative that sellers remain calm and patient, as we agents must do too and we must manage are clients expectations from the outset and throughout the process as a whole. Neither buyers nor their advisors will be rushed, and trying to force the process will only have a negative impact. Just recently the owners of a building plot became exasperated with their purchaser and the length of time everything was taking. Against our advice they enforced a deadline upon their buyers and the buyers promptly walked away and our clients are now back at square one, in fact it is now far more likely that the plot will sell for a lower figure next time round. The important thing to remember is that it is better for everyone concerned if a sale proceeds to completion and not when.

Patrick Brady
Associate
Residential, Bath

Park Life

It might be the summer festival season but in considering the great outdoors Will Mooney, Carter Jonas partner and joint head of its commercial agency and professional services in the eastern region, goes urban so no wellies required.

The Queen Elizabeth II Fields Challenge is a Jubilee initiative where, a charitable trust will enshrine 2,012 spaces, in perpetuity, for public recreation. Yet, by June there were still more than 700 spaces being sought and the Fields in Trust chief executive expressed her disappointment with lack of progress.

The week after the Jubilee Pageant saw Granary Square, King’s Cross open as London’s newest public space, built on the former site of the station’s sidings and goods yards. This occasion saw one broadsheet newspaper initiate debate about ownership of public spaces.

It’s a debate worth having.

As a nation, we’re living an increasingly urbanised existence and so, on a daily basis, the bulk of our population’s encounter with the great outdoors is open spaces in cities or towns.

A seam of this debate is consideration of just who owns public space and what is meant by ‘public space’ in our times. In certain quarters, there’s discomfort about these spaces being owned by private interests and the fact that the owners specify what can and can’t be done in these newly created spaces.

However, the counterpoint is that while this model of private ownership might be new, bylaws and protection of public spaces to make them clean, safe and useable is not.

As cities expand, public spaces have to be created as part of wider development. Granary Square is a new space created by the modernisation of the King’s Cross complex which, before its recent development and that of St Pancras next door, was a neglected and dingy part of a main London gateway.

Now it’s a showpiece.

Just west, along Marylebone Road, is Regent’s Park. Developed to a masterplan incorporating open spaces and surrounding houses in the early 19th century, the freehold of the Park is owned by The Crown Estate and it’s managed by a government agency, The Royal Parks. The Park is gated, activities within it are regulated and public access is restricted at night.

But which Londoner or visitor would say it’s not a public space?

Holland Park is a similar case. It was a rural part of London until 19th century development, along a similar model as that of Regent’s Park. The Park itself has byelaws and is gated yet it is a district and public park managed by a local authority – albeit the Royal Borough of Kensington & Chelsea.

While these parks are funded and managed either directly or indirectly through the public purse, to create, develop and maintain new sites for public open space in densely populated areas, we need to see that Granary Square is more the model now in a time when private interests fund what the public purse can’t or won’t afford.

It’s not just in the crowded south east where private investment is being offered in order to ensure the perpetuity of public open space. Aberdeen City Council is considering the need for a £50 million gift from a local businessman for redevelopment of its famous Union Terrace Gardens, as part of a wider £140 million scheme for an arts complex. Although the proposed development will re-shape the gardens, they will still be public.

The Gardens were once the site where Aberdonians laid out washing to dry.

What we want from our public spaces has always evolved.

We are happy to shop or enjoy leisure pursuits in safe, clean, cool, modern shopping malls – owned and managed by private interests – so why does that attitude change when it comes to public open space, just because there’s no roof?


Will Mooney MRICS
Partner
Commercial, Cambridge

Funding for Farmers

During these straitened times, we often hear that one of the main concerns for businesses is the difficulty of borrowing money, but for farmers this is probably less of a problem than for other sectors of the economy. This is because farming has generally prospered in recent years as commodity prices have risen; this has been reflected in higher farming profits, except perhaps in the dairy industry, and soaring agricultural land values.

Consequently banks are more confident to lend to farmers although even then it has to be said they are certainly not lending indiscriminately and are looking at every business case very carefully. In this context I have had a reasonable amount of experience drawing up both business plans for presenting to banks and carrying out valuations to support lending proposals and what is clear is that money is being lent but only on the back of good businesses. Even then the interest rates being offered are much higher than they were four or five years ago despite the historically low Bank of England 0.5% base rate The reason for this is that all banks have had to widen their margins to increase the capital they hold in order to put themselves in a stronger position to withstand another financial crisis without having to be bailed out by central government. Thus it must be of significant interest to hear that one bank which specialises in lending to farmers, the Agricultural Mortgage Corporation (AMC), has negotiated access to a multi million pound European Investment Bank (EIB) investment fund which can effectively subsidise eligible loans with a significant discount of 0.65 % off the AMC’s normal loan margin.

"Our access to this fund allows us to effectively subsidise loans for a wide range of farm improvement and diversification projects including building works and livestock housing, machinery and equipment purchases, farm shops, milking parlours and farm energy schemes. The total fund pot is limited and we have already seen a good level of interest. Farmers with a particular project in mind are urged to contact their local AMC agent," said Jonathan Allright, Head of AMC.

As one such agent I would suggest this scheme provides an opportunity for farmers who are considering expanding or investing in their farm to access favourable loan rates at a time when interest rates are already historically low. I see it as an important tool to help reduce the effects of price fluctuations and input cost volatility.

The minimum amount borrowers can apply for in the scheme is £25,500. The discount is available on loans of up to 10 years for projects that have a definite start and end date and must complete their loan by December 2013.

A wide range of projects within the scope of the scheme and I suggest farmers should consider using this funding to strengthen their farm business for the long term. Indeed with the demands to produce food for a growing world population increasing, this funding offers a real financial boost at an important time for many farm businesses Should anyone have any queries regarding this scheme please contact James Stephen.



James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk